We present to you thoughts from KPMG on future outlook and how it may impact behavior in retail sector.
It is widely believed that the current slowdown might last for 12 – 18 months – depending on government incentives in increasing spends on infrastructure, development initiatives and other activities to stimulate the economy.
Expect an increased focus on value retail in the coming months and a shift away from lifestyle goods, thanks to the impact of the current slowdown. There is expected to be increasing action in food retailing and FMCG products as this segment is largely insulated from the slowdown, while sectors such as home furnishing are less favored.
Retailers are likely to start closing unprofitable stores and rationalize capital expenditure, as a part of cost optimization. Churn in malls is likely to increase in the short term when some retailers opt for low-rent premises as a means of sustenance in the current economic
Tier I cities will become saturated, retailers may move to Tier II, Tier III cities where profits are higher due to lower rentals and operating costs. There are going to be increased investments in shortening of supply chain. This is mainly due to the incentives offered by the government and the potential for higher profit margins.
The frequency with which retailers liquidate slow-moving goods by offering discounts to reduce inventory is likely to increase.